Kellmer ex rel. Fannie Mae v. Raines
400 U.S. App. D.C. 65
| D.C. Cir. | 2012Background
- Shareholders filed a derivative suit against Fannie Mae’s directors after a large earnings restatement.
- FHFA, as conservator under HERA, intervened and moved to substitute itself for the shareholders in the three actions.
- District court granted substitution in Kellmer v. Raines and Agnes v. Raines, but treated Middleton v. Raines differently and denied some motions to dismiss without prejudice.
- FHFA later sought voluntary dismissal without prejudice or a 180-day stay; the district court denied in Kellmer and Middleton but granted in Agnes.
- The district court then granted Fannie Mae’s motions to dismiss Kellmer and Middleton with prejudice; on appeal, the substitution order is challenged and the denial of voluntary dismissal is challenged, while the dismissal with prejudice is argued to be moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether HERA transfers derivative-rights to FHFA, justifying substitution | Kellmer/Agnes: rights survive; conservator not yet acting cannot preclude suits | FHFA: becomes sole plaintiff by operation of law under HERA | Yes, substitution proper under HERA (FHFA succeeds to rights) |
| Whether district court abused its discretion by denying voluntary dismissal without prejudice | FHFA seeks dismissal; directors face lack of prejudice claims | District court should maintain case for potential later rulings | Yes, abuse of discretion; should have granted without prejudice |
| Whether the appeal renders the mootness of dismissal-with-prejudice moot and future proceedings | If dismissed without prejudice, preclusion issues may arise later | No prejudice to defendants if refiled; but preclusion may apply | Remand with instructions to dismiss without prejudice; dismissal-with-prejudice order vacated as moot |
Key Cases Cited
- Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Raines, 534 F.3d 779 (D.C.Cir.2008) (affirmed district court on related authority; involved FHFA-like issues)
- Conafay v. Wyeth Labs., 841 F.2d 417 (D.C.Cir.1988) (abuse of discretion standard for voluntary dismissal)
- Conafay v. Wyeth Labs., 793 F.2d 350 (D.C.Cir.1986) (early Conafay decision on voluntary dismissal)
- Pareto v. FDIC, 139 F.3d 696 (9th Cir.1998) (statutory transfer of rights to conservator; derivative action rights)
- In re Freddie Mac, 643 F.Supp.2d 790 (E.D.Va.2009) (comment on derivative-rights transfer under FIRREA/HERA framework)
- La. Mun. Police Emps. Ret. Sys. v. FHFA, 434 Fed.Appx. 188 (4th Cir.2011) (per curiam on similar FIRREA/FHFA derivative-rights issues)